May 3 Markets Report: We've Got Good News and Bad News, Which One Do You Want First?
Gas prices are up everywhere (including the metaverse), stock market earnings are falling a little flat this quarter, and when it comes to sports collectibles MJ never goes out of style.
Published May 3, 2022•Updated Jun 22, 2022
Source: BBC News
Putin Promises to Strike Down Anyone Who Interferes
- Under UN protection, Russia is allowing civilians to be evacuated from the besieged city of Mariupol’s Azovstal iron and steel works. So far, about 100 civilians have been evacuated, with 1,000 more waiting.
- Russian forces in the city of Kherson have officially overthrown the government, forcing the city’s residents to live under a new regime where they’re only allowed outside during daytime, forbidden from gathering in groups and forced to use the ruble as currency.
- According to the UK’s Ministry of Defense, more than 25% of Russian soldiers sent to Ukraine have been rendered “combat-ineffective”.
- As tensions continue to rise between Western allies and Russia, Putin warns that foreign intervention would provoke “lightning fast” strikes from Moscow.
The US Dollar Heats Up as the Economy Slows Down
- Gross domestic product (GDP) declined at an annual rate of 1.4% in the first quarter of 2022, as reported by the US Department of Commerce. This decrease in GDP reflects lower levels of private inventory investment, exports, and government spending.
- Despite this, The U.S. dollar index, which compares the greenback against a basket of foreign currencies, reached a 20-year high of 103.928 on Thursday.
China’s Exacerbating Worldwide Inflation
- A new report by the Peterson Institute for International Economics reveals that China is exacerbating the food crisis and worldwide inflation that was initially triggered by Russia's invasion of Ukraine.
- Apparently The PRC has been imposing restrictions and tariffs on commodities like fertilizer, pork and steel, reducing their input costs for industry but passing those costs along to other countries that are already struggling with record-high prices.
Stocks & Bonds
Stocks & Bonds
Last Month Took an L, But This Month Stocks Bounce Back?
- This past April, popular indexes like the Dow and Nasdaq performed their worst since the 2020 and 2008 financial crises. But after a brutal month where the market shed anywhere from 5% to 13%, stocks seem to be bouncing back.
- The Dow Jones Industrial Average and S&P 500 are currently down 0.54% and 0.47% for the week, while the Nasdaq Composite is already 0.36% in the green.
Earnings Season Is Bittersweet
- One the one hand, over 80% of S&P 500 companies that have reported earnings so far have beat expectations. But earnings growth is still falling. According to FactSet, the aggregate EPS of these companies are below five-year averages.
- FAANG stocks like Meta, Apple, Netflix and Microsoft all beat earnings expectations to varying degrees. Netflix, in particular, beat EPS expectations by a massive 20% even though they lost over 200k subscribers in Q1.
- Amazon and Google were this quarter’s worst earners, with Amazon missing expectations by over 189%.
- Even though stocks like Meta and Apple beat expectations, they still warned investors that sales might drop in the second quarter due to factors like supply constraints.
Watching Bond Yields Like a Hawk
- The benchmark 10-year Treasury yield briefly rose above 3% on Monday, but traded back down to 2.97% at the time of writing.
- Investors are nervously looking ahead to the Fed meeting on Wednesday, after which Federal Reserve Chairman Jerome Powell will inform us about the next rate hikes and the Fed’s quantitative tightening (QT) plans.
Mortgage Rates in Bubble Territory
- Last Friday, the 30-year fixed mortgage rate spiked up to 5.55%, the highest level we’ve seen since the 2008 housing bubble burst.
People Just Want Sunny Days and Cheaper Stays. But Beware the Consequences
- According to a new survey by moving truck rental company Penske, most of their customers have been headed on one-way trips to Sun Belt cities like: Houston, Las Vegas, Phoenix, Charlotte, Denver, San Antonio, Dallas, Orlando, Austin and Chicago.
- While these cities typically offer lower costs and warmer climates, the influx of new residents is ironically driving up home prices.
- While the total value of US homes has increased 19% year-over-year, homes in Austin and Phoenix are up more than 30%.
BTC Takes a Haircut, But Whales Don’t Care Bruh
- Crypto caps off a disappointing month, with Bitcoin (BTC) shedding 17.3% in its worst April on record.
- BTC has been trading sideways at about $38k this past week, with investors eyeing $35k as channel support. A drop below that would require us to brace for a bear-case target of $30k.
- Despite Bitcoin’s recent lackluster performance, on-chain data is still looking super bullish as Bitcoin whale holdings have reached their highest level since September 2021 (right before BTC rallied to $69k).
- Also worth mentioning, venture capitalists (VCs) remain bullish on crypto, pouring $14.6 billion into crypto-focused startups.
More ETH Under Lock and Key
- As of last Friday, there’s nearly 12 million ETH staked on Ethereum’s (ETH) Beacon Chain.
- This total value locked equals about $34 billion and represents around 10% of the total circulating ETH supply.
- This acts as a bullish indicator, since holders are locking their ETH up until after the Merge later this year.
Do Citizens Even Use Bitcoin as Legal Tender?
- On Thursday, The Central African Republic (CAR) announced that it has adopted Bitcoin as legal tender, making it the second country after El Salvador to do so.
- But not everything’s all rosy in Bitcoin land. A recent survey by the National Bureau of Economic Research concluded that most people in El Salvador aren’t even using BTC.
Crypto Payment Options on the Rise (Mostly)
NFTs & Metaverse
NFTs & Metaverse
The Trillion-Dollar Metaverse Opportunity
- In their 2022 NFT survey, Coingecko projects the Metaverse market to reach $800 billion in the next 2 years.
- The report, which mostly analyzed NFT owners in the Asia Pacific region, found that their age groups are almost equally divided between 18-30 year olds and 30-50 year olds. What’s more, these users seem to be most interested in metaverse and gaming NFTs.
You Can Look But Don’t Touch my NFTs
- Last week, The U.K.’s High Court ruled that NFTs are to be considered property.
- This, in turn, gives victims of NFT theft more recourse in terms of getting their stolen assets back. Some critics, however, do point out that this violates the whole “Code Is Law” ideal.
They Came, They Saw, They Conquered the Otherside
- In the days leading up to the release of Bored Ape Yacht Club’s (BYAC) metaverse project called Otherwise, ApeCoin (APE) has surpassed MANA, SAND and AXS to become the largest metaverse token by market cap ($4.3 billion).
- The “Otherdeed” metaverse NFT mint on Saturday was so hyped that it clogged the Ethereum network and sent gas prices soaring to unbelievable heights, with some users paying thousands of dollars in fees per transaction.
- Otherdeeds have generated over $372 million in sales thus far.
Crude Prices Creeping Back Up
- This past week, international benchmark Brent rose 3.14% and is currently sitting at $107.77.
- Meanwhile the U.S. oil benchmark WTI gained 3.65% and is worth $105.89 at the time of writing.
The Russian Gas Squeeze
- The biggest piece of news this week is the announcement that Moscow’s energy company Gazprom would stop supplying gas to Poland and Bulgaria, as they refused to pay for gas in rubles. This move will likely exacerbate European inflation, which was already at a record-high of 7.5% in March.
- Russia’s willingness to cut off countries’ energy supply is obviously worrying, since the European Union depends on Russia for over 40% of its gas imports. Germany and Italy are among the largest importers in the EU.
- Economists warn that if Russia were to cut off gas flows to European countries like Germany, they would be plunged into a deep recession where they have to ration gas consumption.
- This act of aggression is only prompting the EU to accelerate their plans to reduce Russian energy imports and totally phase them out by 2030.
MJ’s Still Dunkin on ‘Em
- Over the past week, basketball, baseball and football cards saw some of the highest sales prices on eBay, with a Michael Jordan rookie card taking the top spot.
VCs Are Prepping for the Robopocalypse
- This week we saw over $2.6 billion in funding spread out across industries like AI, advertising, healthcare and renewable energy.
- The two largest rounds this week belonged to a pair of Berlin companies: Football media platform OneFootball ($300 million) and tax filing app Taxfix ($200 million).
- Over in the US, the two biggest funding rounds included: Anthropic, an AI safety research company ($580 million) and iSpot.tv, a real-time TV ad analytics company ($325 million).
Keep an Eye on This IPO
- Global eye care company Bausch + Lomb Corp. (BLCO) is planning to go public on May 6 with a dual listing on the New York Stock Exchange and the Toronto Stock Exchange.
- BLCO is set to be the second-biggest IPO of 2022, likely to raise $787.5 million. The share price is expected to be somewhere in the $21-$24 range with a market valuation of about $8 billion.